04/23/2012 10:28 -0400BondBorrowing CostsCRECREdefaultEuropean Central BankEuropean UnionGermanyGreeceGross Domestic ProductheadlinesInternational Monetary FundNetherlandsnon performing loansReal estateRealityRecessionrecoverySovereign DebtTurkeyUnemploymentRoughly two years ago, we penned a piece called How Greece Killed Its Own Banks.
It outlined the end result of Greece attempting to hide sparse demand for its debt by forcing its banks to binge on it using excessive leverage.
Well, let’s look at it from a visual perspective: Greece and the ECB kicked the can down the road for two years, but as fate would have it.
Reality rears its ugly head, as exemplified in today’s MSM headline from CNBC: Record Losses at Greek Banks Show Pain of Bond SwapGreece’s top banks posted historic losses for 2011 on Friday, hit by a bond swap last month that blew holes in their balance sheets and nearly wiped out their capital base.
Together, National, Alpha, Eurobank and Piraeus, posted an aggregate loss of 28.2 billion euros ($37.3 billion), about 10 times their current market worth or 13 percent of the country’s GDP .
The banks treated losses from last month’s bond swap to cut the country’s debts — part of a rescue package for Greece negotiated with the European Union and International Monetary Fund — as if they took place last year.
Inflicting real losses of about 74 percent on bondholders, Greece’s debt swap proved a near fatal financial torpedo for lenders, crippling the sector’s capital base.
From the big four banks, only Alpha spelled out clearly where this left its Core Tier 1 capital ratio.
The other three reported where capital ratios would land after their use of standby funds provided by a capital backstop, the Hellenic financial Stability Fund (HFSF).
Eurobank [EFG FF 0.61 0.004 (+0.66%) ], the country’s second biggest, did not disclose the figure but said the hit left it with total equity of 875 million euros.
National Bank [NAG FF 1.73 -0.02 (-1.14%) ], the country’s biggest lender with operations in Turkey, said its Core Tier 1 ratio would reach 6.3 percent, taking into account the use of a 6.9 billion euros standby facility provided by the HFSF fund.
Piraeus gave no Tier 1 figure but said tapping up to 5 billion euros of HFSF funds would boost its total capital adequacy ratio to 9.7 percent.
Greek bank shares have shed 74 percent in the last 12 months, underperforming the Greek stock market which is down 50 percent.
Battered by a shrinking deposit base, rising loan impairments and unable to access wholesale funding markets, banks will need to fill the resulting capital shortfall and meet capital adequacy targets set by the central bank.
Moniqua Hope is a business journalist based in Hokkaido, Japan. Moniqua has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Moniqua spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.
